Short-term timer transitions to LONG-CASH

.
Forgive the abbreviated entry today.  Sorry, no graphics, as I'm doing this from my iPad.

The GGT Price index fell on Wednesday by -1.04% on slightly lower than average volume.  The price decline was a bit higher than normal, so color this a bit more bearish.

The LCR dropped from 1.929 to 1.719, hence the indicator is back in sync with price (see yesterday's blog).

The strength index fell a huge amount, dropping from 0.811 to 0.591.  This places it squarely in no-man's land, and figuring out where we go to from here is difficult if we use just this indicator.

Of greater importance is that the LCR Change Timer has transitioned to LONG-CASH.  If today is a down day according to the LCR (proxy at http://www.finviz.com/ using the ADV/DEC on the home page), we will see a transition to CASH today. 

Elder continues to indicate that we can enter stocks with strong metrics.  The 13d Force Index is positive.  The 2d Force Index is negative.  These are signalling entry into stocks.  Of immediate concern is that Wednesday showed three consecutive days of a downward-pointing slope in the 13d Force Index, and this is a rare event.  If today (Thursday) is down then Katie, bar the doors, as I think (if volume is strong) we will see the Elder 13d Force Index transition negative, basically telling us to close all of our long positions.  The slope has been growing in negative magnitude day-over-day, so having it reverse is absolutely essential to continuing our focus on long-sided positions.  Failure to reverse today will be huge for our intermediate-termed holdings.

===============

Trading Plan for Thursday

Unfortunately, my intermediate-term portfolio is now underwater by -0.3%.  I will continue to purchase Elder candidates (use my filters for HGSI to screen, shown in previous blogs), if they move higher in price and volume.  I closed my VLTR position for a significant loss, as it continued to slide yesterday.  I picked up CMCSA @ $19.71, so add that to the list if you are following along.

My UWM position is very underwater, down -5.75%.  I had set a TSL but fat-fingered the entry to be a Trailing Stop LIMIT, so it blew through my limit order and never exectued.  Now I have a significant loss and very vew days to recover from it.  It may be moot -- if today is a down day as measured at the end of the trading day I'll sell this for a loss and lick my wounds, elseif today is an up day I'll continue to hold, in accordance with the LCR Change Timer.

I sold my QLD position yesterday at a very slight gain (just enough to cover commissions and make about 0.1%).

If we are down today I will close my UWM position and enter TWM/QID positions before the close.

Tough market.

===============

Regards,

pgd

Price and LCR Divergence ...

.

The GGT Price Index moved down -0.65% to $25.94 on normal volume of 2.7M shares.  Standing alone, these two metrics are unremarkable.

Of interest is that the GGT Long-Cash Ratio (LCR), which is a ratio of the number of stocks with some form of LONG recommendation to those with a CASH recommendation, continued to grow in a dramatic fashion, jumping another 15% to 1.929.  We now have 1678 stocks that are LONG and 870 that are CASH, the highest level of this ratio since late April.  This continues to be very bullish.

The LCR is comprised of three components:

• price action
• volume action
• rate of change of price

When price action, volume action, and rate of change all move to the upside faster than some "optimized" level of the past, we get some form of a LONG signal on a stock.  Failure of volume action, or rate of change of price, compared to historical levels, simply results in the individual security remaining with a CASH signal.

For the price index to drop, which means that the average price of the database is dropping, but for LCR to go up, we have had a couple of things happen.  First, think of the database as having some price/volume/ROC (P/V/R) level that causes stocks to move long.  Every day this level changes, because the lookback period marches forward one day at a time (e.g., I don't reference to January 1st of 200X, I simply look back in a sliding window fashion for a fixed 1 year or 2 year period).  If we were above this P/V/R level yesterday, and with today's action, even though prices may have fallen, we have a greater "distance" between where we are today and today's new P/V/R level, we can see that prices could have fallen but the LCR could have moved up, as more stocks will have crossed their threshold from CASH to LONG.  This is where we are today.

So what does this mean for our trading?

Prices falling but the LCR increasing cannot be sustained.  Either the LCR must also fall, because to get a CASH recommendation all we need is a breakdown in prices, or prices must resume a march upward, because ROC levels are being sustained.  It's impossible to predict, but for now, my feeling is that we can continue higher with some minor pullbacks.

===================

Short-Term LCR Change Timer

Back to the chart above.

The LCR Change Timer continues to indicate that we should be long on a short-term basis.  My positions in UWM and QLD are up, but are under tremendous pressure of losing ground.  Given that the LCR has moved aggressively upward I will continue to hold these positions.

==================

Intermediate-Term Elder Timer

The Elder 13d Force Index continues to sit firmly above 0, which is our primary gate for intermediate-term investing.  Somewhat worrisome is that we have had two consecutive days of the 13d FI pointing downward, which is mildly bearish.  Three consecutive days would be a warning shot across our LONG bow, so pay attention to today's action/tomorrow's blog.  The 2d Force Index is positive, which is indicating that the market is overbought.  We must be selective on our entries if we continue to move long into new positions.  Bullish for this leg are the slopes of the 13d and 34d EMA prices of the database -- they are both in an upward trend.  Further bullish is that the 13d > 34d EMA prices, which means we are clearly rising in overall value and this long call is quite valid.

My intermediate-term positions came under tremendous fire yesterday.  VLTR hit estimates, but because it did not blow them out of the water, the market rewarded them with a drop of nearly -13%.  I have placed a 1% TSL on the position simply to protect my downside, and because the 13d FI on VLTR moved negative.  My intermediate term portfolio went from being up +4% to being flat on the day, which certainly hurts.  Overall though, when looking at the group as a whole, the index chart pattern looks very strong:

Note that in the figure above:

• Bull-power is still very positive,
• Bear-power is weaker than bull power, and is getting smaller,
• The 13d Force Index ribbon is green, which means it is positive
• The 2d Force Index has moved green (for this basket of stocks), which means that it is NEGATIVE.  Conceptually, if we wanted to add to my basket of stocks, if prices resume an upward march, today would be a good day to do so because of the status of the 2d FI,
• The slopes of the 13d and 34d EMAs for this basket are very positive (bullish)

There is NOTHING in this basket of stocks that is telling me to dump them (except for the individual performance of VLTR).

===========

The pullback in prices has expanded the Elder list.  Here it is, sorted by strongest Relative Strength:

I haven't screened these as far as chart patterns, so you'll need to do that work yourself.

In terms of velocity (change in relative strength), here are the strongest:

Definately some surprises in there.

Finally, here is the list of strongest accelerations (change in velocity)

I like how some of the same names keep coming up.

=======================

Trading Plan for Wednesday

Futures are down, so I may lock in my gains in UWM and QLD before they go underwater.  If I see a classic "V" during intra-day I may repurchase these, or add to these.  My discretion.  Remember, this is with respect to the short-term LCR Change Timer.

With respect to the intermediate-term Elder timer, I'm watching to see if we have a breakdown in the primary Elder signal (13d FI < 0), but if any of the stocks show strength today, I'll most likely jump in.  Remember, I'm looking for price action above yesterday's high AND %volume greater than the 10d MA of volume.  Read back in my previous blogs for the scale.

Note that WE HAVE A DIVERGENCE in price and LCR.  This is a fork in the road.  Continued weakness will cause the LCR to reverse, and this could be dangerous for our gains.  Watch the ADV/DEC bar at http://www.finviz.com/ to see what the market is doing intraday.

=================

Remember, you are responsible for your own trading decisions, not me.  Please do your own work.

Regards,

pgd

Continue LONG on Short and Intermediate Term Timers

.

As with all my images, right-click on them to open in a new window.

The price index moved up +1.40% Monday, to end the day at $26.11.  Volume was down just a tad but is within a standard deviation of the mean, which I consider unremarkable. 

The Long-Cash Ratio continues to grow by leaps and bounds, and is now at 1.682, indicating that 1598 stocks have some form of long status and 950 stocks have some form of cash recommendation.  This latter situation with the LCR is very bullish. 

The strength index continues to grow, and is now at 0.879, where a value of 1 would be completely overbought.  If your time horizon is short you may want to protect some of your gains if the market begins to reverse.

==========

Short-Term LCR Change Timer

This timer is in Day 2 of being LONG.  I purchased positions in UWM ($29.85, up +4.1%) and QLD ($58.70, up +1.4%), both of which are just trading above their 200d EMA, which is a newly-established gate that I have for each of these ETFs.  The 200d isn't universal, but it will keep you on the right side of the market.  It's modeled on some of Larry Connor's work.  I will sell these positions if they drop below the 2-day-ago low, or if they are giving up all of their gains.

==========

Intermediate-Term Elder Timer

This timer is LONG, but is showing some weakness.  The slope of the 13d Force Index is negative, so we are losing steam.  The 2d Force Index is positive, which means we should wait for a pullback.

Because the 13d Force Index is long, it is ok to enter stocks that on a micro-scale (e.g., evaluate each stock), meet the Elder criteria.  My scan for today shows some good candidates, if the continue higher:

Relative Strength candidates are GSB, IGTE, SY, RDWR.  Velocity candidates are GPK, DEP, SY, and IGTE.  Acceleration candidates are GPK, RCNI, DEP, and QUIK.  The chart patterns of some of these are questionable, and I'll leave that as an exercise for you.  SY is flatlined, so disregard.  Here's a hint though:  use my slope chart, and pick stocks which have upward-trending EMAs of the 65d EMA slope.  Here's GSB as an example:

Note how many of the EMAs on the 65d EMA of price slope are starting to trend down.  While GSB certainly can go higher, the 21d and 34d are out of sync, and more importantly, the shorter ones are clearly heading down.  Wouldn't you want to get into something that is heading upward?  Do this for the other stocks in the list.  So while the stocks do meet the 13d/2d Force Index criteria, they clearly need to get some momentum behind them in order to warrant our monies.

===============

Trading Plan for Tuesday

Watch for continued strength in the Elder stocks, and add if they show pricing strength above yesterday's high on higher volume than their 10d (I posted my intra-day volume levels last week).  IDT popped up to nearly 12% gain yesterday so I intend to tighten my stop to yesterday's low on that one.    In premarket this morning it looks like it could move even higher now.  Here are the total gains per position for my intermediate-term holdings:

• BRCM - up +0.86 
• GMCR - down -1.84%
• IDT - up +11.84%
• KWR - up +6.26%
• LSCC - up +7.70%
• ROVI - up +3.03%
• VLTR - up +1.73%

As I indicated yesterday, these are not equal weighted, so my total gain within this portfolio is +4.05% over two days.  I will add additional Elder candidates under the intermediate-term timer if they show strength.



I will continue to hold UWM and QLD and protect their gains.

=================

Remember, you are responsible for your own trading decisions.  Please do your homework.

Regards,

pgd

Short Term LCR Change Timer has moved LONG

.
Let's start with our normal dashboard view:

Over the last two trading days I've watched the GGT Price Index move up 2.64% and 1.82%, finishing Friday at $25.75.  Volume over the last 6 trading days has been right in line with the 50d MA, which is now at 2.6M shares.  Strong price movement on solid volume cannot be ignored, hence we have a fundamentally-solid setup to the long side.

The 4th column from the left is the GGT Long-Cash Ratio (LCR).  The LCR has moved above 1.0, indicating that more stocks in the database are above their historical EMAs than are below.  To be precise, we have a LCR of 1.273, a value not seen since May 4th.  We now have 1430 stocks with some form of a long recommendation and 1123 stocks with some form of a cash recommendation.  These are stocks that

1. Trade above $1
2. Have daily trading volume above 100K
3. Are on the three major exchanges

Hence I consider them all to be very liquid and very indicative of the market as a whole.  The fact that we have crossed over with more stocks long than not is a tipping point achievement -- if we can maintain this, I think we'll continue to move higher.  We'll see.

Providing a cautionary view is the 6th column from the left, which is the GGT database strength.  This is an oscillator that moves between 0 and 1, with 1 being completely overbought.  Right now we are at 0.834, which indicates that we are significantly overbought and the probability of a pull-back is increased.  Typically, values higher than a less-than-scientific-level of 0.7 are indications of being overbought, and when this value resets to an-again-less-than-scientific-level of 0.2 we typically start moving upward.  I would be cautionary in jumping on new longs today, but of course, this depends on your timeframe.  This strength indicator is a very short-term indicator, and in terms of using it for intermediate-length holdings, is probably more powerful when it is used to signal entry than to indicate buying/selling.

================

Short-Term LCR Change Timer

The LCR Change Timer, which is a short-term timer, has moved LONG with Friday's close.  I use this timer to enter the index leveraged ETFs, and will do so today (Monday).  See last week's blogs for a better idea on the timing/duration of this signal.

================

Intermediate-Term Elder Timer

The Elder timer system has been long since 7/13.  I entered stocks this past Thursday afternoon, after they indicated that they were moving higher on solid volume.  I posted my stocks, and a question came up over the weekend on how I chose the stocks, as my blog from last week only contained those meeting Elder's criteria and those that met a HGSI relative strength criteria.  Let me explain, although due to limitations with HGSI I cannot recreate the scans on Wednesday of last week (it is not a historical database per se).

Today's Elder scan based on Acceleration, Velocity, and Relative Strength is as follows:

These are the only stocks in the HGSI database that meet the following filter:

It should be very evident in the view above how I am selecting stocks.

The key here is that HGSI allows us to look at Relative Strength, which is a comparison to a specific company's price change over the past 12 months, Velocity, which is the CHANGE in Relative Strength over some period of time, and Acceleration, which is the CHANGE in Velocity over some period of time.

So look at the figure above the filter selection criteria.  Globalscape is showing a 99% in Relative Strength, which means in price action, it is outperforming 99% of the database.  The Velocity of Globalscape is also a 99, so it's change in price action is presently outperforming 99% of it's history.  Note though that it has an Acceleration of 20, which means that compared to the past, it's not moving up as aggressively as it has in the past.  The result is that while Globalscape is a good candidate for entry, it does seem to be losing steam in moving upward (acceleration is slowing).

So, in my selection of good candidate stocks meeting Elder's entry criteria, I look for strong Relative Strength, then I look for those stocks which also have a strong Velocity -- those that are moving up in Relative Strength to their history -- and I also look for those stocks which have a strong Acceleration -- those stocks who are gaining price value at an increasing rate.  THIS is how I selected my entry list for Thursday -- it was a combination of RS, VEL, and ACC stocks that were "Green", as well as those that had good volume for the day.

Putting this in context, the portfolio is up since my entry late Thursday:

• BRCM - down -0.33%
• GMCR - down -2.60%
• IDT - up +2.62%
• KWR - up +3.68%
• LSCC - up +4.83%
• ROVI - up +0.45%
• VLTR - down -0.66%

These are not equal-weighted, as I used the ATR(20) to size the positions.  Net-net the portfolio is up an actual +1.65% for the day on Friday and going into trading this Monday morning.

====================

Trading Plan for Monday

For my short-term timer, I intend to enter the leveraged 2x index ETFs if they are showing strength.  Market futures are down as I type this so entry early in the day is suspect.

For my intermediate-term timer, GSB and QUIK have strong Relative Strengths.  As part of the Elder system, they have to clear Friday's high for me to enter.  GSB and GMCR have strong Velocities, and again, I want to see price strength before entry, at least above Friday's high.  QUIK and GMCR have strong Accelerations, but since they are already in the list, this criteria is moot.

===================

Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.

Regards,

pgd

3:50 pm Thursday Update

.
In accordance with my earlier blog, and more specifically, on the strength of the intermediate-term Elder timer and the status of various stocks meeting Elder criteria, I have purchased single positions in the following:

IDT
LSCC
GMCR
VLTR
KWR
BRCM
ROVI

We'll see how they fare over the intermediate-term.
 
Regards,
 
pgd

Keeping my Powder Dry

.
The markets tanked yesterday, in response to the FED's statements, so we didn't whipsaw.  I suppose that's the good news.  The less-than-good-news is that we are not moving in any general direction, which makes it hard for those of us who trend-follow.

I intend to keep my powder dry today -- there simply is lack of conviction to move the markets in any direction.

Here's the status dashboard:

As with all my images, right-click on them to open in another window.

The GGT Price Index fell -1.32% to $24.64 on average volume of 2.7M shares.   Unremarkable when observed in a vacuum.

The GGT Long-Cash Ratio moved downward slightly, falling from 0.616 to 0.589, indicating a slight downward bias in the database.  The movement isn't dramatic, so we're in the "noise" -- neither up nor down.

================

GGT Short-Duration LCR Change Timer

This short-term timer is biased into CASH, as triggered this past Monday, but I'm holding no positions on either side of the trade.  Data at the end of the day is generally counter to the short-term direction of the timer, hence I've been precluded from entering.  As this signal is now three days old I will wait for a move to the long side before entering -- contra positions are risky at this point unless we see some clear trending to the downside.  The "yellow" on the graph above indicates a back-and-forth movement of the smoothed LCR change signal, and it's hard to make money when we have a "yellow" block indicated.

Futures are UP as I write this, so if this holds for today, we'll see ANOTHER yellow block with the close of the markets.  If the markets finish DOWN across the board, this will move back to another CASH call and limited exposure to contra ETFs could be evaluated.  I intend to wait until the last 30 minutes of the day to make a determination.

===============

Intermediate-Duration Elder Timer

Elder continues to indicate LONG, although the 13d Force Index slope is pointing downward (bad news if this is sustained).  It's also indicating that the 2d Force Index is POSITIVE, which means we need to wait for more of a pull-back to enter stocks on a broad, long basis.  This being said, there are candidates to review.

Of interest is that of the HGSI stocks that I listed yesterday, all the "green ones" were moving up solidly yesterday until 2 pm, then their bottoms fell out.  I'm glad I waited to make a determination.  Again, I will do the same today; here's my list:

================

Trading Plan for Thursday

In terms of the short-term LCR Change signal, I'll enter contra positions if we continue south today, as determined by the behavior of the market in the last 30 minutes or so.

In terms of the intermediate-term Elder signal, I'm watching the list above, specifically looking for strength (higher than yesterday's high on volume greater than the 10d MA), as measured in the last 30 minutes of the market behavior.

================

Remember, you are responsible for your own investment decisions.  Please do your own diligence.

Regards,

pgd

Short Term Whipsaw? Watch for Reversal to Short-Term LONG

.
Let's start with our dashboard:

Monday saw a reversal of sorts, with the markets opening significantly down and then moving upward steadily throughout the day.  The GGT Price Index moved up +1.67%, ending at $24.97.  Volume was steady compared to the 50d MA @ 2.6M shares.  I consider this data normal.

The Long-Cash Ratio (LCR) moved upward again, a jump of 15%, to finish the day at 0.616.  Overall, 972 stocks are above their historical optimized values and 1577 are below, with the trend moving upward at the present time.  Rising prices on rising LCR is bullish on a short-term basis.

The GGT Strength Index, which is an oscillator between 0 and 1, jumped a huge amount from 0.318 to 0.619.  This has moved us into never-never land -- the area above 0.2 and below 0.7 it typically wishy-washy and using this indicator in a vacuum is a crap shoot.  Although I like to see price, LCR, and strength aligned, it's hard to tell what's going on right now.

================

LCR Short Term Change Timer 

The LCR Change Timer, which is a short-term timer, has moved back to CASH-LONG (0) from it's transition to cash on Monday.  It is very possible that if Wednesday is up that we will move long again.  This whipsaw in the signal, while not "normal", does happen.  Here's a chart I posted last week which shows the number of times, when the timer is in CASH, that it transitions back to LONG:

The chart above shows us that since August 2008 we have had:

1. 5 occurrences of the signal changing within 2 days 
2. 2 occurrences of the signal changing within 3-4 days
3. 4 occurrences of the signal changing within 5-6 days
4. 6 occurrences of the signal changing within 7-8 days

You get the idea.

Bottom line:  don't be surprised at a call to long.

To determine whether we should move long, I use http://www.finviz.com:

Here, we see that for Tuesday's action, we had 4699 ADV stocks and 1428 DEC stocks.  Volume was below "average".  194 New Highs were reported, and 114 New Lows were reported.  Aside from the volume, these are bullish indicators.

Watch FinViz near the end of today.  If you see the ADV/DEC favoring the ADV side of the balance, then there is a high probability that the LCR will move to LONG.  You'll have confidence if you also see the New Highs > New Lows.  Conversely, if you see the DEC > ADV, we'll be stuck in this limbo-land at least another day or two.

====================

Our Friend Elder, the Intermediate-Term Timer

Elder continues to indicate a bull leg, as evidenced by the following:

• Elder 13d Force Index is positive (indicated by the green LONG in column 9)
• Elder 13d Force Index slope is upward (indicated by the green BULLISH in column 10)
• Elder 2d Force Index is positive (which is showing that we should WAIT to enter now, column 11)
• GGT 13d EMA slope is positive (column 12)
• GGT 34d EMA slope is positive (column 13)
• 13d EMA > 34d EMA (column 14)

My watch list for stocks, using HGSI, is the following:

Note that all of these stocks have a positive 13d Force Index and a negative 2d Force Index, yet have an ERG > 240.

===============

Trading Plan for Wednesday

I sold my positions in UWM and QLD using the 1% TSL, which in hindsight was probably a bad thing to do but the rules are the rules. 

If the markets move higher today I will enter the index ETFs.  I will do this because of the LCR Short Term Change Timer transitioning to a LONG call with the close today.

If stocks on the list above are up above yesterday's highs on good 10d volume (see yesterday's blog for my chart of "good volume"), I will open intermediate-term positions in the stocks above.  I will make the evaluation later today, say after 3:15 pm.

===============

Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.

Regards,

pgd